How do I Choose the Best 401k Provider?

Securing the appropriate retirement plan can be the difference between retiring happy and working for the rest of your life. Choosing the best 401k provider is a key component of this process. A 401k plan typically is administered by an employer, and this company typically will assign one 401k plan provider for the entire plan, covering all plan members or employees invested with that retirement scheme. Most 401k plan provider contracts have expiration dates, and if the retirement plan is not performing up to expectations, a replacement firm might be sought.

Many investment management firms also have a segment of the business dedicated to 401k plan administration. A good place to begin a search is with some of the common investment management firms in your region. If you’re not sure what those firms are, this can be achieved with an Internet search using terms such as "investment manager," "money manager" or "401k provider."

Another trick is to find out which company some of the most successful 401k plans are using as a 401k plan provider. Most public and private retirement plans disclose the makeup of their plan someplace. A public plan typically will detail the investment managers engaged by the plan on its website or specifically in an annual report posted on the website. Also, investment performance typically is outlined in these documents, so by drawing a parallel between returns and the firms that are advising the plan, you can better find a suitable 401k provider. Private retirement plans typically do not post investment manager relationships on their website, but in some regions, they are required to file with the regulatory body on an annual basis some disclosures about the investment of the plan.

You also might want to consider 401k provider fees. Depending on the size of the retirement plan, there will be different fee structures in place at various 401k plan providers. Sometimes, fees are the deciding factor, but it usually is a combination of investment performance and costs that lead to a selection. There are times when a 401k plan provider will negotiate fees in order to win the business. Before making a selection, you can spend some time interviewing potential candidates and gathering historical information surrounding performance and fees, and this will help lead you to a sound choice for a 401k provider.